No good in a crisis

This sceptical view of global governance signs off charges with a realistic if depressing conclusion

Who’s in Charge Here? How Governments are Failing the World Economy, by Alan Beattie, Penguin, RRP ebook £1.99

Alan Beattie is cross. He is cross with the Group of 20, the International Monetary Fund, the World Trade Organisation, the European Union and the Obama administration. He doesn’t think much, either, of the US constitution, the euro, the Doha round of trade talks, or the attempts by emerging market “Brics” to construct a new international grouping. And as for Gordon Brown and Nicolas Sarkozy – well, don’t ask.

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As this newspaper’s international economy editor, based in Washington, Beattie has observed these entities and individuals up close, and he understands their flaws all too well. They may have strengths, too, but he has rather lost sight of them. His view is that the whole damned shooting match is a shambles, and no mistake.

Some of the charge sheet he assembles is familiar ground. He excoriates the IMF for its complacency pre-crisis. He highlights the flaws in the US and, to a lesser extent, the UK’s financial regulatory structures. The critique of the EU’s failure to get to grips with the problems of Greece in particular, and the euro in general, is also familiar to those who read Wolfgang Münchau’s regular euro-obituaries in these pages.

Beattie does, however, add a rather different dimension. It has become conventional to say that the switch from the G7 to the G20 as the steering group of what passes for global economic governance, which came about at the end of 2008 when the financial system peered into the abyss, has been a positive move, bringing into the tent countries whose economic behaviour is crucial to our future prosperity.

Beattie is a sceptic. For him, the G20 is “a pantomime horse manned by a troupe of slapstick clowns”, which has in practice achieved little or nothing. I have rather more sympathy with this creature, perhaps because I once appeared on stage as the rear half, and have first-hand knowledge of the difficulty of keeping it in one piece. It seems to me that while the G20 is unwieldy, the alternative is unviable. So we have to struggle on.

Nonetheless, Beattie’s general point is well taken. The structures and institutions that oversee the world’s financial system have struggled to respond to the crisis. There was initial enthusiasm for reform, but it has run into the sands of local politics. We have quickly reverted to “normal service”, in which the Americans say rude things about China and the renminbi, and the EU and the US propose subtly different rules, opening up fascinating new opportunities for regulatory arbitrage.

Only one group of actors meets with the approval of this demanding observer: the central banks. Their informal deals – a co-ordinated reduction of interest rates here, a massive liquidity injection there – have kept the ship afloat, just. He calls it “minilateralism”, a term unlikely to catch on with Ben Bernanke and Mario Draghi.

Beattie’s answer to the question he poses in the title? “All too often, no one.” The US cannot lead, but nothing can happen without the US. It is a realistic if depressing conclusion.

Sir Howard Davies is a professor at the Institute of Political Studies (Sciences Po) in Paris